What are sectoral mutual funds?

There are different types of mutual funds available in the world of investing. If you are among those you look for ‘high-risk but high-return’ investment options, then you can consider sector funds. As the name suggests, these are mutual funds that invest in a particular sector or theme to generate returns. Sectoral funds belong to the equity mutual fund category suitable for those who have advanced knowledge of mutual funds and are ready to face the risk factors as it can make or break your money. Let us get an understanding of what sector fund mutual funds are.

Sector funds – get an idea

Sector funds are an ideal choice for those who have a high-risk appetite. A sector fund is a type of mutual fund that invests money in a particular sector of the economy, as the name implies. This can be energy, infrastructure, or utilities.  Sectoral funds are not suitable for every investor but recommended to only those with high risk-appetite and advanced mutual fund knowledge. These funds are popular for going through high-rewarding situations. Many large investors choose this mutual fund type because of its potential to protect them from firm-specific individual risk.

Before investing your money in sectoral funds, an investor have a very good understanding about macro trends as investing in it can double or trouble your money.  Unlike equity funds, you need to take selective stakes in this type of mutual funds for getting high returns. Even if the overall market of sector funds is performing well, an investor should ready to face moderate to high losses if he chooses this fund type to invest his or her money.

Different categories of Sectoral funds

Available in different types, these fund types can vary in investment objective and market capitalization. Instead of fall in a specific category of mid-cap or large-cap growth, sectoral funds are classified into different categories. The eight different categories of sectoral mutual funds are:

Utility Funds:  These are sectoral funds invest in shares of utility businesses. Managed by the Association of Mutual Funds in India, these funds have the potential to pay regular income for investors as dividends.

Natural resources funds: Ideal for long-term investors, money invests in this fund in energy sources like oil and gas.

Financial funds: The stocks of this fund invest in companies of commercial or financial industry like insurance firms, banking companies, mortgage companies, accounting firms and investment firms.

Real estate funds: Ideal for small investors, these stocks invest in property market.

Technology funds: Investors will get an exposure in the technology sector by investing in these funds. The companies in this sector mainly focus on electronics, IT and computers.

Health-care funds: Investing in the stocks of pharmaceutical companies, these funds focus on biotechnology.

Refined metals fund: Investors will an exposure to different categories of metals like gold, silver and copper by investing in this type of sectoral fund.

Communications Funds: People invest their money in stocks of communication sector like phone, mobile communication and internet service providers related companies.

Sectoral mutual are a mutual fund type that invest in specific sectors to generate returns. This investment scheme is suitable for those with a deep understanding of mutual funds and high risk appetite. These funds are designed to get market sharing for its investors even if they lack exposure of a specific sector. If you invest in sectoral funds at the correct timing, you can make a huge profit, but you must know when to start and when to exit the fund. Investors should choose stocks of those companies that they are confident and see potential growth for earning better returns.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh